Thursday, US President Donald Trump followed through on his threat to leave the Paris Agreement. A total of 147 countries have ratified the Agreement, which states that a global temperature rise will remain well below two degrees Celsius, and efforts will be made to limit it even further to 1.5 degrees Celsius. The Paris Agreement was a decisive breakthrough in international climate efforts and is needed more than ever now that we are getting reports that Arctic ice is melting much faster than researchers expected. The US leaving the Paris Agreement is a huge setback for future international climate efforts. It also affects tomorrow’s jobs and the labor market. The rest of the world cannot afford to slow down to wait for the US. Those who opt out of making the transition now will be left hopelessly behind.
“Swedish experience shows that predictability and effective policy levers play an important role in companies’ transition potential.”
An increasing number of companies see profitability and business opportunities in reducing their climate impact and respond to growing demand for sustainable solutions. The challenge of climate change requires policies and leadership that create opportunities for the business sector to use this to turn risks into opportunities. The US now risks moving in a direction diametrically opposed to its own development and the development of the rest of the world.
In connection with the annual spring meetings of the IMF and the World Bank, we co-organized a seminar on climate-smart growth and the business sector’s role in the climate transition. The seminar in Washington pointed out the lessons Sweden has learned regarding the role of policies and the business sector and their interaction in the climate transition. Sweden is one of the most innovative countries in the world and at the same time has both one of the world’s most ambitious goals for emissions reductions and for transition to a 100 percent renewable electricity system.
It was long a common perception that climate efforts led to increased costs and that the aim of companies’ climate efforts was to live up to requirements and avoid risks. In recent years, this perception has changed – companies have realized that ambitious climate efforts present opportunities. The Haga Initiative is a network of companies that wants to show that the business sector is part of the solution in the climate transition. Each of the 15 heads of the companies that make up the Haga Initiative can describe how both customers and employees are more loyal to companies that take responsibility for the climate, and how climate efforts lead to technological development, innovations and new products that in turn result in new and better business opportunities. The Initiative’s vision is actually working out so well that these companies have already achieved the previous climate objective of a 40 percent reduction in emissions, and have now raised the bar – they intend to be fossil-free by 2030.
Swedish experience shows that predictability and effective policy levers play an important role in companies’ transition potential. Despite having the world’s highest carbon tax for more than 20 years and an unusually strict climate policy, seen in an international perspective, Swedish companies are at the forefront and have retained and reinforced their international competitiveness. At national level we now see that since 1990, emissions in Sweden have decreased by 25 percent while GDP has increased by 69 percent. Just as in many other parts of the world, we see that the link between the curves for carbon emissions and increased GDP has been broken. A shining example is the development in the renewable energy industry, where we can see how a significant fall in price can be linked to a dramatic increase in employment and growth.
These Swedish climate success stories are not surprising to those following the research. More than 10 years ago, prominent economist Nicholas Stern stated that the costs of not taking action against climate change will be much higher than if the world takes decisive action now. Based on Mr Stern’s realization that it will be more expensive to take action later, the New Climate Economy research commission stated in a report that it is less expensive to take action now, since many climate measures also lead to major benefits to society. Just recently the OECD published a report concluding that the G20-countries thorugh acting on climate change can increase growth by one percent by 2021 and 2.8 percent by 2050. At company level, Harvard Professor Robert G. Eccles has shown that companies with a focus on sustainability perform better and have a higher market value than other companies.
In addition, parts of the US business sector would like to see a stronger climate policy. The “Business Backs Low-Carbon USA”-initiative has the support of more than 1 000 companies and investors in the United States. They want to see climate-smart investments and continued US support for the Paris Agreement, since this creates jobs and strengthens US competitiveness. China and the EU remain committed to the Paris Agreement. What will it mean if the US continues increasing its emissions when the rest of the world continues on the path towards an efficient and climate-smart economy?
There are 160 000 jobs in the coal industry, but there are twice as many jobs in the solar industry alone. There are 640 000 jobs in traditional industries linked to fossil energy, but there are 2.5 million jobs in the new climate economy. The US needs the green industry for its growth, its jobs and its welfare.
Several major companies in the US have taken the lead and contributed to green technological development around the world. The US also represents an important market for a number of Swedish companies. Sweden is one of the largest investors per capita in the US. Swedish companies create more than 330 000 jobs in the US. There is every reason now to focus on continuing to strengthen cooperation with these companies – and the states and cities in the US with ambitious climate agendas – to promote positive social development and ensure a market for sustainable enterprise internationally and on the other side of the Atlantic.